Is that really true? Deflation sounds conclusively worse. Everyone starts to hoard money instead of spend it, and the economy goes into a tailspin. Any debt you pay back is with dollars that are worth less. Most anyone in debt, which is a lot of people, should prefer inflation.
Total credit card interest and fees paid by Americans are up 47% from the high of 2019 •
Overall economic output continues to increase, but it drains so quickly, and increasingly to depreciating assets.
Of the young adults I know, I ask if they do even have a rough budget. Only two couples said yes, none of the singles or other couples. I know many are paying large sums to interest on consumer debt, with student loans looming for later.
I don’t have any other statistics, and now will seek them. It raises the question at least, how might we assess the benefit achieved thanks in part to loans to the majority of households over the past 50-100 years?
• https://wallethub.com/edu/how-much-americans-pay-in-credit-c...
A debtless economy would be an absolute nightmare.
The interests of a working person who rents is different from a working person who owns their own home, whose interests are different from a residential real estate investor's, whose interests are different from a business owner's, whose interests are different from a venture capitalist's, whose interests are different from a stock broker's.
In the depths of the financial crisis in 2008/9 I remember Bernanke saying he would fly helicopters and drop bags of money if it came to that in order to fight deflation taking hold.
Huh? just literally print more money.
>That money will not end up in the hands of those who need it.
Yes, but it's irrelevant for this discussion.
Ok, imagine people start hoarding money, where are they going to store money? In Banks. Which would use that money to invest in things, like always.
Modern economics are nothing like economics in 1930, but somehow we still base our science on that era.
No, people only invest if they see a return. If the return is too low they will simply hold onto the money since interest rates can't go negative too deeply. Your idea only works in a fantasy land with mandated equilibrium. In the real world people don't care if there is an equilibrium or not.
I'm talking about banks. That's literally their business. You know, to lend money.
> If the return is too low they will simply hold onto the money since interest rates can't go negative too deeply.
Who talked about interest rate? Why banks cant use THE MONEY THEY HAVE to lend/invest?
Their business is to make money. If the economy is in the toilet, it is usually because there is no demand, and if there is no demand businesses and individuals do not need loans to expand and operate, so no one is asking for credit, so banks have no one to lend to.
The banks don't want the/your money: while a savings account is an asset to you, the other side of the ledger is a liability for the bank. And if they are to provide x% to the saver, they have to earn >x% to break even (adding overhead), never mind make money.
Just a little while ago in Europe, there was all sorts of excess savings (especially in Germany) with no places to invest the piles of cash piling up, so you get negative interest rates on savings accounts:
* https://www.bnnbloomberg.ca/eu-says-danish-banks-probably-ca...
* https://archive.ph/U8Ds6 / https://www.wsj.com/articles/banks-in-germany-tell-customers...
> Why banks cant use THE MONEY THEY HAVE to lend/invest?
This is not how the banking system works, and has not been for decades. Tobin called the lend-savings model the "Old View" in 1963:
* https://elischolar.library.yale.edu/cowles-discussion-paper-...
Please stop using and talking about the money multiplier, as it just muddles up people's understanding about reality:
* https://www.pragcap.com/r-i-p-the-money-multiplier/
* https://research.stlouisfed.org/publications/page1-econ/2021...
The way that the bank system works is that banks first create a loan and second look for reserves:
* https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
* https://rationalreminder.ca/podcast/132
The amount of savings that a bank holds has nothing to do with anything. There are entire countries without reserve requirements:
* https://en.wikipedia.org/wiki/Reserve_requirement#Countries_...
The middle class grows when there is stability and neither inflation nor deflation. The constant instability we see only benefits the capital holders who can profit off both the ups and downs.
I’m not sure how many more years of a quasi government organization (that is far too buddy buddy with major capital holders) imposing a tax on existing (inflation) we’ll have to suffer before we get a central bank that exists for the American people and not capital that operates in America.
The USA is arguably the most capitalistic country/culture/society on Earth, and you're wondering how long it will be until the USA fundamentally changes the core mechanism of its banking to be inherently socialistic?
I can't say when, but it's not happening without a violent revolution that would make 1790s France look like a children's fairy tale.
Any link you can share?
Edit: Google "disinflation wealth redistribution" provides some relevant results